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2016 (3) TMI 212 - AT - Income TaxRectification of mistake - claim of bad debts written off disallowed - assessee written off the said amount out of the total provision made during the assessment year 2004-05 and claimed the same while computing income of the assessee - CIT(A) accepted the explanation of the assessee and allowed the claim of the assessee in respect of the said amount. It was also observed that this issue cannot be examined in proceedings u/s 154. Held that:- Assessee has duly explained that during the financial year 2003-04 relevant to assessment year 2004-05, assessee-company made a provision for bad and doubtful debts of ₹ 1,32,94,600/- and debited same to the profit and loss account but the assessee did not claim said amount in the return of income at the time of computation of income and the entire provision made for bad and doubtful debts debited to profit and loss account was added to the income shown in the profit and loss account in the computation of income. The AO has not disputed this fact while passing the impugned order u/s 154. Even before us, revenue has not disputed these facts explained by the assessee. During the year under consideration, the assessee has written off a sum of ₹ 98,00,327/- out of the total provision made for bad and doubtful debts of ₹ 1,32,94,610/-. Thus, in the books of account, the assessee has reversed provision to the extent of said amount which was not recoverable and passed entries by debiting provision for bad and doubtful debts and credited to the profit and loss account. This treatment of reversing provision in the books of account cannot effect the allowability of the claim of the assessee in respect of bad debts written off during the year. The AO has disallowed the claim of the assessee on the ground that the submissions are not supported by contemporary evidence. It is pertinent to note that the entire record was available with the AO and particularly the ledger accounts of the debtors wherein entries for bad debts written off has been carried out by the assessee along with provision for bad and doubtful debts made during the financial year 2003-04 relevant to assessment year 2004-05. Therefore, as per provisions of sec.36(1)(vi), the assessee is not required to establish that debts actually gone bad once the assessee has written off the amounts in the books of account. The CIT(A) has allowed the claim of the assessee by taking note of the fact that in the books of account, assessee has made entries in respect of reversal of provision for bad and doubtful debts made in the assessment year 2004-05. Therefore, in view of the above facts and circumstances of the case, we do not find any error or illegality in the impugned order of the CIT(A). - Decided against revenue
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